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Kazakhstan proposes power and tax price hikes targeting crypto miners

The Kazakh government is considering a three-pronged proposal designed to make cryptominers pay much more for their operations in the country, which could make Kazakhstan less attractive to the industry. On February 4, Kazakhstan’s First Deputy Finance Minister Marat Sultangaziyev proposed a price increase from $0.0023 per Kwh to $0.01 (about a 335% increase) specifically for cryptominers. He also proposed a load on every single graphics card (GPU) and device needed for crypto mining. He compared the tax-per-video card to the way casinos are taxed for every table they spin, whether the table is active or not. The third part of his proposal was to remove mining hardware from a VAT exemption. Bitcoin mining requires the use of specific hardware to complete the mathematical calculations needed to create new blocks on the blockchain. Larger mining operations contain more than 10,000 mining rigs, including application-specific integrated circuits (ASICs), GPUs, racks, cooling units, and associated facilities. Until the government restricted internet access amid political unrest last month, Kazakhstan has become one of the most popular destinations for crypto miners after China’s mining ban last summer. Around January 5, the Bitcoin network hash rate plummeted by 13.4% in a day from about 205 exahashes per second (EH/s) to 177 EH/s due to the brief shutdown in Kazakhstan.BIT Mining, a major Bitcoin mining operation that moved from China to Kazakhstan last July stated in January that political turmoil would not force the country to relocate its operations elsewhere. However, that was before the power and tax increases were proposed. Cheap electricity costs and proximity to China have attracted miners fleeing Chinese authorities amid crackdowns in the country. This led to Kazakhstan becoming the second largest producer of hash power for Bitcoin after the United States, producing about 18% of the network’s hashrate by August 2021, according to the University of Cambridge. It may become less desirable for new and existing miners to call it their base of operations once the crippling tax proposals go into effect. It should also be noted that Kazakhstan has been struggling with power supply issues since late last year, around the same time crypto miners from China stormed in. The country saw an 8% increase in domestic electricity consumption through 2021, prompting the government to build a nuclear power plant to relieve pressure on the power grid and keep energy costs low. Related: All Eyes On Asia: The New Chapter Of Crypto After ChinaCheap Electricity Seems To Be The Main Factor Attracting Miners. Cointelegraph reported on January 27 that the US cannot provide the cheapest electricity and therefore “cannot hold the title of mining champion for long”. Taking that advantage away from miners in Kazakhstan could spell the demise of the country’s ambitions to extract $1.5 billion from miners within the next 5 years.
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